August 2015 Archives

As I speak with franchisors, multi-unit decision franchisees and their marketing teams. I am hearing some very common themes from some of the top franchises in the nation and even new and upcoming ones.

If you are reading this and are a franchised company or multi-unit operation, you understand better than anyone the incredible challenges that your business model faces. In addition to keeping up with the competition and staying ahead of the curve, segmented marketing options are making it difficult to properly manage, sustain and protect your brand identity and marketing efforts.

As franchise marketing challenges continue to grow, you need tools that will enable you to get a grip on your brand and maintain its identity while giving your franchisees the freedom to cater to their unique local markets, in a way that represents both you and the franchisee accurately. The trick is finding a tool that is both cost-effective and flexible enough to meet those challenges without compromising the brand you have worked so hard to build.

Here as some common themes I am hearing.

1. Franchised businesses face very specific issues, particularly when it comes to localized content and marketing. Whether franchisees expect that name recognition alone will gain them customers or they have their own special methods of advertising and marketing to their local niche, brand consistency is the most vital component of successful franchise companies. Still, it can be difficult to retain brand consistency when facing the following challenges:

2. Franchisees are typically not marketing-savvy and therefore resort to simply running the business, relying solely on the brand to get them through.

3. Franchisees are ok with supporting the national brand but want it localized, so they take matters into their own hands, using content or marketing tactics that damages or ignores the brand altogether.

4. There is not an end to end marketing system in place to monitor, drive and sustain the brand. In turn the franchisees sometimes get creative to localize promotions or products or services that they offer to cater to the local market. In their mind they are left to fend for themselves as the franchisers expect them to find or customize locally relevant content or marketing promotions.

Based on my experience as a franchise, I also believe.

1. Tools for localized marketing are clunky and difficult to navigate, and often buried in the company CRM. So even when franchisees are willing and able to build communication to speak to the local client base, it becomes cumbersome and intimidating to do so.

2. Most importantly, let's be honest, you would be lucky to get 10% participation across the board from traditional tools incorporated in CRM's. ( There are exceptions)

3. Franchisors are not accessible to franchisees or owners are busy running the business, making communication difficult and putting the Franchise brand at risk. I know I know... there is typically one or two in a typical franchisor marketing team for small and large chains alike. You can only do so much. Sometimes you just need a little help.

4. Franchisees are ok with paying into supporting the national brand but get frustrated that the content does not speak to the local product mix or growth vertical they are capitalizing on. They would like a little input or control. That would make them real happy!

It is also well known that Franchise Marketing tools that collect dust. We have all seen them, 10 year old marketing collateral that was brought in with good intentions but were not utilized properly at the time and fell into the hands of an unsuspecting customer. Sometimes with an old offer or pricing that makes conversations awkward and damages brand and cuts into profitability.

Content Curation Tools as a Solution

One type solution to the many challenges faced by franchisors and savvy business owners in the franchise business today is the use of content curation tools.

Content curation tools gives franchisors an outlet to control the company's brand identity without limiting franchisees in their local content, promotions or other marketing.

Franchisors can push national marketing direction to the franchisees often housed on the company website or blog and share basic marketing materials and content for the franchisees to change out if they feel necessary. This could include products , services, calls to action, promotions, specials etc.

Franchisees can edit or alter certain controlled aspects of the messaging to reflect the brand's presence in their local community, all without compromising the image that the company has worked to create. Given the limited resources most companies have we build and provide the newsletter content for you (with your guidence of course).

So most Directors of Marketing can simply make a few suggestions to edit and then publish to the local franchisees who can then edit from a selected amount of related local content or offers and share via email list or share socially via Twitter , Facebook etc.. It is a simple, inexpensive and all-encompassing way to control your message, give the local franchisees an opportunity to get involved and fine tune content and offers on a local level which at the end of the day, should retain and grow existing business as well as gain new customers.

What else? What other challenges are there? I would love to hear from you or chat about possibilities.

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The other night I had dinner at a favorite restaurant. Unfortunately, a bad customer service experience tainted the evening. The good news is that this event created a learning opportunity.

By the way, you don't have to be in the restaurant business to appreciate and learn from this story. As I take you through the story and the lessons we can take away from it, think about how they apply to your business.

On that evening I ordered the pasta dish that I've been ordering for years. It came out wrong. It had peas in it. Not just a few peas, but loaded with peas.

And I hate peas.

I picked up the menu and confirmed that I hadn't misread the description. Nowhere did it say peas. I motioned the server over and told her about the problem.

She had a great attitude and was happily going to take care of the situation.

But, just about then, the manager who had been observing, stepped in. I had never seen this manager before. He didn't apologize, and instead told me that they have two chefs and that this one likes to put peas in the pasta dishes. He said that most people find that the peas are a pleasant surprise.

Ah, that explains it. A pleasant surprise - not for me! And I nicely told him so. He just stared at me. I could tell how uncomfortable the server was at this interaction. She wanted to do something, but the manger had taken over, and he was blowing it.

Eventually, the manger asked if I would like to get a different pasta entree. I asked if they could make the same dish without the peas, as was on the menu. He finally took the dish away.

Several lessons come out of this incident:

1. The server was handling things just fine. The manger got in the way of her taking care of me.
2. The manager didn't respond with the same enthusiastic attitude of taking care of me, the way the server did. He didn't even apologize. Managers should set examples - good examples.
3. The manager should have immediately taken the dish away. If you can get a problem out of the customer's sight, do it quickly. Once the dish has been taken away, then launch into recovery mode.
4. The manager made an excuse rather than give an explanation. There is a fine line between excuses and explanations. An explanation comes with an apology and doesn't come across as defensive or aggressive.
5. The manager wasn't listening to me. Why would he call the peas a pleasant surprise when he knew I didn't want them in the pasta? Because, he was defending the decision of his chef to change the ingredients. (Read that as changing a process if you aren't in the restaurant business.)
6. Finally, the incident broke the consistency of prior experiences, which now leads to a lack of confidence. The next time I order this pasta dish I'm going to have to ask if it has peas, because you never know who's cooking in the back. Will it be the chef that likes to "pleasantly surprise" people with ingredients that aren't listed on the menu or the chef that follows the recipes I love - the ones that make me want to come back again and again.

The restaurant is great, and I'm going back, because I know this is an isolated incident. But, what if this was my first or second time at this restaurant? Given all of the good places there are to eat, would I want to spend my hard-earned money at a restaurant, or with any type of business, that makes mistakes?

My friend Tom Baldwin, former CEO of Morton's Steakhouse says, "Great service is mistakes handled well." That's great advice for any business.

Shep Hyken is a customer service expert, professional speaker and New York Times bestselling business author. For information contact (314) 692-2200 or http://www.hyken.com.

For information on The Customer Focus™ customer service training programs go to http://www.thecustomerfocus.com. Follow on Twitter: @Hyken

(Copyright ©MMXII, Shep Hyken)

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Some people say it's lonely at the top. Well it doesn't have to be!

In today's post I'll introduce you to a powerful way of getting your employees involved in the business.

It's called Open-Book Management and it has two critical elements:

• sharing business information (open-book)
• developing a process that enables everyone to use that information to improve the company (management).

But you can't just open up the books and expect more engagement and improved results - you have to actively and persistently manage the process.

That's where The Great Game of Business by Jack Stack comes in.

It's about running your business in a strategic, forward thinking fashion.

Employees are taught the rules of business, enabled and expected to improve performance based on that knowledge, and given a Stake in the Outcome - good or bad.

They aren't looking to historical financial information for answers, they are forecasting the future of the business and making it happen.

Business is a game, after all.

It's a competitive undertaking with rules, ways of keeping score, elements of luck and talent, winners and losers.

It can be as exciting, as challenging, as interesting and as fun as any game - provided, that is, you understand the rules and are given a chance to play. The difference is that in business, the stakes are higher, much higher.'

How do you teach people the business and make it understandable, interesting, meaningful, and maybe even a little fun?

That's the challenge - and that's where The Game comes in.

What if we could approach our day-to-day business activities with the same state of preparation, the same level of knowledge, the same enthusiasm, and most importantly, the same desire to win as we do with any competitive endeavor we pursue?

The Game is strategy and management practice that takes the basic components of any game, applies them to the challenge of running a business, and provides employees (the players) a way to understand, participate and contribute in the overall performance of the business.

The Game levels the playing field and gives everyone the opportunity to act and take responsibility for the success of the company.

The Principles of the Great Game of Business; Every Employee...

• Should be given the measures of business success and taught to understand them
• Know & Teach the Rules
• Should be expected and enabled to act on their knowledge to improve performance
• Follow the Action & Keep Score
• Should have a direct stake in the company's success or risk of failure
• Provide a Stake in the Outcome

Something to think about? You bet!

For in-depth business growth training, video tutorials, and done-for-you tools and marketing pieces you can implement in your business today, get a $1, 30-day trial of The Goldhill Internet Academy.

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7th Circuit Court of Appeals Judge Richard Posner has written an essay in the New Republic "discussing" Justice Scalia's recent book (co-authored with Bryan Garner), "Reading Law: The Interpretation of Legal Texts."

In Judge Posner's essay, he reminded us of an "old saw," an unreported 2006 Massachusetts court decision** about the meaning of the words we choose to use in our leases.*** In this particular case, the word is "sandwich."

A Panera Bread franchisee spent several months negotiating a lease, "partly because of [Panera's] request to include an exclusivity clause in the lease."

Panera prepared the original text and it was revised three times before the lease was signed. Subject to a number of carve-outs, the core of its disputed language was:

Landlord agrees not to lease... for [use as] a bakery or restaurant reasonably expected to have annual sales of sandwiches [emphasis ours] greater than ten percent of its total sales... ."

Pretty simple - protect our sandwich business, we don't want the competition.

Along comes the Mexican-style QSR (quick service restaurant f/n/a fast food restaurant) - Qdoba. Its menu items include tacos, burritos, and quesadillas.

So, after Qdoba spent "over $85,000" in planning costs and contractually committed to spending another $300,000, Panera threatened its shopping center landlord and the landlord reacted by seeking a declaratory judgment to the effect that Panera's exclusive use right had not been violated.

Panera responded by asking the same court for a preliminary injunction to stop Qdoba. The niceties of those remedies, declaratory judgment and preliminary injunction.

And Panera lost. Here's why:

Simply speaking, Panera argued that a burrito was a sandwich and the Landlord argued that it was not.

So, the court had to interpret the lease. There are a series of rules used by courts to aid in contract interpretation.

For now, all we need to know is that "[t]he starting point must be the actual words chosen by the parties to express their agreement. [] If the words of the contract are plain and free from ambiguity, they must be construed in accordance with their ordinary and usual sense."

From that point onward, it was all downhill for the court. It found that the term "sandwiches" was not ambiguous. Thus, because the lease didn't provide its own definition, it looked for the "ordinary meaning."

Where did that come from? The court turned to The New Webster Third International Dictionary, where it found a "sandwich" to be "two thin pieces of bread, usually buttered, with a thin layer (as of meat, cheese, or a savory mixture) spread between them."

Without saying so, the court couldn't find the "second" slice in a taco, burrito or quesadilla, and it didn't even believe that the flour tortilla was bread.

Panera tried to extend a finding by the International Trade Court's to "prove" that a corn taco shell was bread, but this court was unmoved. It said the Trade Court's tariff-setting opinion used "bread" in its commercial sense, but the Panera lease was using "bread" (as an unspoken part of "sandwich") in its ordinary sense, and tacos are not ordinarily thought of as "bread."

According to the court, there was no evidence that, during their negotiations, either the landlord or the tenant intended burritos, tacos or quesadillas to be counted as sandwiches. Thus, Panera lost.

The Massachusetts court pointed out certain missed opportunities for Panera to have done a better job for itself. For one, during negotiations, it never even told the landlord that it had any concern about burritos, etc. Next, it knew or should have known of other QSRs that sold sandwich "alternatives," either by way of its general knowledge or because there were Mexican-style restaurants at other shopping centers near this very location.

Fundamentally, the court summed up this blog for us when it wrote: "Because [Panera] failed to use more specific language or definitions for "'sandwiches' in the Lease, it is bound to the language and the common meaning attributable to 'sandwiches' that the parties agreed upon when the Lease was drafted."

What went wrong for this Panera franchisee was that it forgot what it really wanted to protect. It defined its business too narrowly. The Panera franchisee shouldn't have thought of itself as being a sandwich business.

Assuming that it wasn't going to be able to bar every other style of QSR, it probably should have seen itself as selling items that were the functional equivalent of sandwiches.

Courts are people too, and as people they understand categories described by way of example. So, Panera could have "gone for" a list, such as: "sandwiches and the functional equivalent of sandwiches, including without limitation: wraps, burritos, tacos, quesadilla, and pita pockets."

Add "hamburgers" or "hot dogs" if that's what you intend. That might have done the trick.
Also, it would have fleshed out the "issue" during negotiations, and had the text survived, this case would not have arisen in the first place - no angst, no legal bills.

Now, to beat up on the court a little (as Judge Posner seemed to be doing). The court's strict reliance on the dictionary ended any other attempt it might have made to understand what was really intended and, quite frankly, what should have been expected - at least to the point where the issue could (or should) have been fleshed out during lease negotiations. That's unfortunate because, had the court been inclined (or persuaded by Panera's attorneys) to think beyond "textualism," it might have realized that it was authorizing the sale of items like pita pockets (under the one piece of bread theory).

From there, one could go to an intact roll with a slit on the side and stuffed with meat. How about an "open" roast beef "sandwich"?

How about two of them on sale for five dollars? Eat them one at a time (meaning neither is the court's "sandwich") or fold them together yourself - sandwich or not? On the other hand, how would have the court defined an "open roast beef (or other open) sandwich" if it had already concluded that a sandwich needs two slices of "bread"?

Does the ordinary consumer "see" a hamburger as a sandwich? The court did. Did the landlord? Honestly, did the tenant?
So, if any reader wants to take a shot at redrafting for Panera, keep in mind that using the "list" approach of specifically saying "tacos, burritos, and quesadillas," and not using those as examples, might not catch wraps, pita pockets or similar foods of which neither the reader nor this writer are aware.

We won't discuss whether a restaurant serving "Middle Eastern" food is protected by a carve-out for "near-Eastern" food. Nor did this court, even though the question apparently was presented.

Wikipedia says it like this: "Before the First World War, "Near East" was used in English to refer to the Balkans and the Ottoman Empire, while "Middle East" referred to Iran, Afghanistan, and Central Asia, and the Caucasus. In contrast, "Far East" referred to the countries of East Asia (e.g. China, Japan, Formosa, Korea, Hong Kong, etc.)." It also says the following: "Many [who?] have criticized the term Middle East because of its implicit Eurocentrism."

Ruminations takes no position on this because, if it did, it would feel compelled to figure out what a "Mexican-style restaurant" might be.

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Small business today generally refers to businesses generating under $3 million in annual sales. That's not so small to most people. And big business was small business at one time. The challenge is "how do you get there from here"? The financing community is about to get some real financial assistance-and it's called Factoring. Traditionally, start-ups use the Small Business Loan as seed capital, and this still remains the ideal, lowest risk choice.

Once up and running however, the issues of cash flow, funding growth, dealing with seasonal slumps and the like, become the day to day issues that determine the financial stability and future potential of the company.

The present financing options available to serve these purposes are (1) traditional bank financing, and (2) additional private investment. Each of these options achieves the goal of providing funds to your business but as is always true, there are associated costs.

Bank financing has the nasty side effect of burdening your business with additional debt, not only capital repayment but additional debt by way of interest.

If the goal is to fund growth, taking on additional debt certainly takes a chunk out of the disposable funds available to finance that growth and affects the financial position of the company for years to come. The application process is long and cumbersome. The delay between the time of submission of the application to disbursement is substantial as well, putting extra constraints on the timing of your financing needs. And...what if traditional bank financing is not an option for you? In some cases, you may not be creditworthy, many have used up your available credit limit, or be in violation of debt/equity ratios.

The other common route is private investment. In these cases, the injection of capital is given in return for an equity interest in the business. There are a variety of forms this can take but suffice it to say, that the end result is a dilution of your equity in the company that you have built. While often a great choice for large corporations, the effects are more widely experienced in small companies, especially family run or owner operated businesses.

Diluting equity, or granting an ownership interest to an outside party generally waters down the value of all shares and creates a situation where one shareholder has a preferred status and priority in payment over the original investors. As well, it often creates a loss of control over the decision making processes depending on the clout of the private investor and the amount of money invested. These are serious hidden costs.

So, what now? You can't go to the bank because you are at your credit limit and you don't' want a private investor, but you just got this huge $10 million dollar deal and you need to build a warehouse. Well, there's a new financial hero to the rescue and its name is "Factoring". To say it's new is really a mistake since it has been around since the days of the Roman Empire. The United States factors 50 times as many transactions as Canada and over $1 trillion in sales is factored worldwide annually. In the United States, many banks even have factoring divisions. Some scandals in the United States have left factoring with a undeserved tarnished reputation. In fact, it is a champion of small business and an essential tool in the arsenal of financing options.

Factoring involves the sale of accounts receivable at a discount. Essentially, you sell the receivables that are due to you by your customers to a "factor", who discounts the value of them and pays you in advance. The discount depends on many factors but is generally between 3-6% for a pre-negotiated period of time and a fraction of that thereafter. In essence you are raising funds not on the basis of your creditworthiness but that of your customers. So you may not be able to get credit but as long as your customers are creditworthy you can leverage that to raise funds for your own business.

For example, you may do home stereo installations and work from your truck, but your customer could be Future Shop! BUT, here's the beauty, you have not created the extra burden of debt, nor have you diluted your equity. Yes, you have taken a hit up-front, but, the money did not come out of your pocket and is a cost of doing business. The important thing is that it allowed you to fulfill your main goal of getting financing in a timely manner and being able to take advantage of a growth opportunity that would have otherwise evaded you.

The same line of reasoning works for seasonal businesses who need to maintain a continual cash flow to fund operations. This is a great tool for that! Now, I must confess that I came upon this discovery because I have a client in this field, but sincerely (and morally), this is no sales pitch, it's an honest opinion, because the beauty of this little known source of financing was like a secret that was too good not to share.

The legalities of this financing are equally as simple. If bank financing is in place then all that is required is that the bank give up its first ranking security on the receivable being factored. The bank is generally amenable to as it still has security on everything else. The factor then takes the place of the bank on that receivable and takes security much in the same the bank would. Furthermore, because there are no interest charges on your money, none of the banking legislation is applicable, making the entire transaction simpler all around. The charges you pay are discount fees, the cost of having your money now and avoiding all the burdens of other methods of financing. Second mortgage anyone?

I think what you will find most surprising is that factoring is highly endorsed by financial professionals, including banks. It makes a lot of sense though that they should. Business clients have many needs and professionals, be it lawyers, accountants or bankers need to respond to them. Banks like that it keeps their clients financially afloat when they cannot help them. Small and medium businesses often fail because of short term cash flow problems, not because business is bad!

Traditional bank financing and private investment can never be replaced. They are the cornerstones of corporate finance. The problem is getting to the point where you can truly benefit from their value. Small business to medium, and medium to large, factoring is fulfilling an untapped niche in the financial industry.

While it takes a lot of (paper) work away from us lawyers, I am still all for it. I guess the secret's out of the bag!

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Last April 5, 2012, President Obama signed into law the "Jumpstart Our Business Startups" Act (the JOBS Act) The intended purpose of the JOBS Act is to spur job creation by small companies and start-ups by relaxing the regulatory burdens of raising capital. In this article, we focus on Title III of the JOBS Act, otherwise known as "crowdfunding," and how franchisors and franchisees are uniquely suited to take advantage of this new registration exemption under the Securities Act of 1933, as amended, to sell unregistered securities to the public.

Crowdfunding enables small or start-up businesses that may not have access to traditional methods of capital financing to raise capital via the Internet and social media, typically from small-dollar investors.1

At first glance, crowdfunding appears to be an innovative and easy way for start-ups to obtain financing by using the vast reach of the internet. However, Congress's concerns over investor protection and fraud prevention are evident throughout Title III. Issuers, brokers and funding portals must comply with substantial informational disclosure requirements and undertake affirmative fraud prevention measures.2

Aspiring crowdfunding issuers should note that the JOBS Act requires the Securities and Exchange Commission (SEC) to adopt "such rules as the [SEC] determines may be necessary or appropriate for the protection of investors" within 270 days after the JOBS Act being signed into law. Thus, the SEC, which openly expressed its opposition to crowdfunding prior to the passage of the JOBS Act (including criticism by SEC Chairwoman Mary Schapiro that crowdfunding regulation would be akin to "walking backwards"), will most likely implement burdensome compliance and disclosure requirements.3

Why is this good news for franchises? Unlike other potential issuers, franchisors, and to a lesser extent franchisees, are already subject to rigorous disclosure requirements.4 Much of the disclosure mandated by Title III is already encompassed in a franchise disclosure document ("FDD").5

Therefore, while complying with the extensive disclosure requirements of the JOBS Act may be cost prohibitive and time consuming for most startups, franchisors will have a leg up in that they've already prepared most of the disclosure.6 From the franchisee side, much of the business planning, financial reporting and financial statement preparation mandated by a franchisor can provide the disclosure necessary to meet the likely standards, or at least provide the basis for rapid development of the necessary information.

The basics of crowdfunding are fairly simple. Crowdfunding offerings are capped at $1 million per year. The issuer must be a U.S. company and cannot be a reporting (i.e., filer of periodic reports under the Securities Exchange Act of 1934) or investment company. There are caps on annual investment amounts for investors.

Investors with an annual income or net worth below $100,000 may only be permitted to invest, in the aggregate, the greater of $2,000 or 5 percent of such investor's annual income or net worth. For an investor with an annual income or net worth greater than $100,000, the aggregate annual investment is limited to 10 percent of such investor's annual income or net worth, with a maximum aggregate amount capped at $100,000. Except under certain circumstances, crowdfunded securities are restricted securities with a one-year holding period.

Conducting a crowdfunding offering requires substantial issuer and offering information disclosure. Issuers are required to file certain information with the SEC, and must provide the same to potential investors and intermediaries, including information regarding their business, ownership and capital structure, and the offering itself. A condensed version of some of the issuer disclosure requirements and liability risks appears below.

Issuers must make an initial filing with the SEC which contains, among other things, (i) name, legal status, physical and website addresses; (ii) the names of directors, officers and 20 percent stockholders; (iii) a business plan and description of the business; (iv) financial information, which, depending on the size of the offering, may only include a certified income tax return for an offering of $100,000 or less, or audited financial statements for offerings of $500,000 or more; (v) a description of the purpose and intended use of the offering proceeds, the target offering amount, the price of the securities and the method of their valuation; (vi) the ownership and capital structure of the business, including the terms of the offered securities as well as each class of the issuer's securities, a description of how the issuer's principal stockholders' rights could negatively affect the purchasers of the crowdfunded securities, risks associated with minority ownership and examples of how future securities will be valued; and (vii) any other information required by the SEC.

At least once a year, issuers must also file with the SEC and provide to investors their financial statements and reports of results of operations, as the SEC deems appropriate.

Purchasers of crowdfunded securities will have a private right of action against an issuer's officers or directors for material misstatements and omissions in connection with the offering. An issuer will be liable if it makes an untrue statement of a material fact or omits a material fact required to be stated or necessary to make a statement not misleading, provided the purchaser did not know of the untruth or omission.

Though crowdfunded securities are considered "covered securities," and thus not required to be registered with any state agency, an issuer will still be liable under state securities laws prohibiting fraudulent or unlawful conduct in connection with a securities transaction.

Issuers are also prohibited from advertising the terms of a crowdfunding offering, except for notices directing investors to the funding portal or broker, and may not compensate any thirdparty promoters without disclosing the compensation to investors.

Does this mean that a franchisor can slap a new coversheet on an FDD and launch a crowdfunding offering? No, but with a modest supplement describing the corporate documents and attributes not otherwise covered in the FDD, a franchisor can be quickly compliant with the likely SEC rules and the launch of the offering will be achieved more quickly. Additional considerations will include obtaining consent from the auditors to use the franchisor's financial statements and audit opinion for such purpose, and creation of an investor questionnaire, modeled in many respects on the franchise application, that will elicit the eligibility and limitations of potential investors.

How often does a franchisee ask whether he or she can invest in the franchisor? With public companies, the answer is simple. With a new or small franchisor, the answer is usually not often, because the franchise and securities offering are separate. Crowdfunding offers franchisors the opportunity to consider paired or "paperclip" offerings, where the prospective franchisee is also offered the opportunity to invest in the franchisor's equity.7

Existing franchisees who are successful and committed to the success of the franchise concept offer another readily available pool of potential investors. The FDD Item 20 information about franchisee contact information is a potentially useful tool for a crowdfunding offering.8 The regular communications vehicles between franchisor and franchisee offer the opportunity to promote the offering to a group of potential investors without the need for any public solicitation. That communication pipeline, together with the franchisor's extranet accessible only to franchisees with authorized access, could be a major benefit for the issuer-franchisor.

From a legal theory perspective, the legal duties, obligations and interests of the parties in a crowdfunded franchisor where franchisees are participating investors will need some further thought and guidance. The franchisor and its officers are not fiduciaries for its franchisees, but the officers are indeed fiduciaries for their franchisee-investors and the franchisor. Will a franchisee who is an investor be able to assert an aggressive position under the franchise agreement that can harm the franchisor without liability to co-investors? Defining these roles and the associated legal conduct standards will evolve as SEC enabling regulations permit crowdfunding to commence.

1.JOBS Act: Crowdfunding Summary, Practical Law Company (last visited Jun. 8, 2012).

2. See H.R. 3606 §§ 302(b), 304(a).

3. Benn Protess, Regulator Seeks Feedback on JOBS Act, NYTimes.com (Apr. 11, 2012, 4:16 PM),

4. FTC Disclosure Requirements and Prohibitions Concerning Franchising, 16 C.F.R. § 436.5 (2012).

5. Compare H.R. 3606 § 302(b), with 16 C.F.R. § 436.5 (2012).

6. 16 C.F.R. § 436.5 (2012).

7. Franchisors would need to review and comply with state securities laws, often administered by the same regulatory authority as franchising in merit review registration states, before undertaking such an offering.

8. 16 C.F.R. § 436.5(t)(4) (requiring disclosure of "the names, and the address and telephone number of each of their outlets"). Franchise agreements routinely designate a legal notice contact for official notices, which is another source of the information.

Mr. Buckberg focuses his practice on representing franchisors and multi-unit franchisees in franchising, governance and other transactions. Ms. Jumper practices in the areas of corporate, securities and franchise law. This article originally appeared here.

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I'm in the throes of flea warfare. These parasites have invaded my cats and my home. Temporarily living elsewhere, I had relied on my twenty-one year old son for cat care. Naturally, he hadn't noticed the problem until it became glaringly apparent and, unfortunately, full blown. The lessons from this ordeal are numerous. Some are flea specific but there is one, applicable to employers, that stands out for me (no, it's not that employees are annoying pests!) It is:

It serves employers well to provide new employees with the right tools and information they need and where to go for help. Since my son and I are new at dealing with fleas, there wasn't even a flea comb in the house initially. So I had to obtain an arsenal of targeted weapons, do research and quickly ramp up my knowledge of steps to take. I'm much more knowledgeable now and, hopefully, am being effective in my efforts.

Similarly, be sure your employees, especially when newly hired, have the right tools, equipment, materials and information to do their job or that they know where and how to obtain them. That may seem obvious but, all too often, new employees are hired without thought given to what they'll need, how to help them become competent and productive sooner. All too often, supervisors and co-workers are too busy to help and new employees are left to figure things out on their own.

Here's an example: Taylor is hired for his first job as a part-time merchandiser. He orders, shelves and displays coffee and tea to three grocery stores. He faxes a weekly order every Thursday afternoon but does not have a fax machine. His supervisor makes it clear that the job must be done in 15 hours per week and that he should use one of the grocery stores' fax machines for free. Taylor finds that often the fax machine is broken or in use or the door is locked. This simple task of faxing has become stressful and Taylor wonders if he should find another job. The employer, meanwhile, could have prevented Taylor's stress by: providing a fax machine, devising another mode of transmitting the information, or allowing him to be reimbursed for the extra time and expense of using a store that charges for faxing. Any of these would be less expensive than replacing Taylor.

Supervisors should always spend a little time upfront putting themselves in the shoes of the new employee and thinking about what he or she will need to do the job. The right materials make a huge difference and allow the employee to:

• Do the job more efficiently
• Perform better sooner
• Feel more competent sooner
• Feel part of the organization
• Avoid the sense that the employer doesn't care
• Avoid spinning their wheels
• Avoid stress and boredom

The last bullet is worth expanding upon. As with Taylor in the example above, when employees feel bored or stressed they go into survival mode. Survival mode calls up the fight or flight response that engages the reptilian (or lower, instinctual) part of the brain. Higher cognition, needed for learning and creativity, is not accessible. The quality of the employee's work suffers and so does his perception of his experience at your organization. The employee feels disengaged from the job and from the employer. There are many factors that lead to employee disengagement but not having the right tools is a major contributor. Disengagement leads to mediocre work, less satisfied customers and, as with Taylor in the example, turnover.

Through this flea ordeal I've been both bored by the tedium of eradication activities and stressed by the tenacity of fleas but, unlike Taylor, don't have the option to quit. But I do have tools to get the job done and, if those fail, I know the exterminator to call for help.

You, as an employer, similarly need the right tools and tips to be as effective as possible. For all of your human resources and employment-related needs, for best practices, for online training and HR-related resources, HRSentry is at your fingertips 24/7.

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In recent years, many states have been aggressively taking the stance that out-of-state franchisors have nexus in their state (based on a variety of business factors).

Certain states have even been taking the position that nexus is created when a Franchise Disclosure Document ("FDD") is filed in that state, since the filing of the FDD actually registers the franchise to do business in the state.

Given the complexity of the nexus issue and the ramifications of registering to do business in certain states, franchisors should perform an analysis to determine which states tax returns should be filed in.

Furthermore, franchisors should strongly consider taking advantage of amnesty programs where offered. In addition to the limited availability of these programs, franchisors should be cognizant of the fact that these amnesty programs are only available for short periods of time and often come with specific criteria, such as: that no claim for unpaid taxes has previously been asserted against the taxpayer or the taxpayer has not been notified of an audit for the tax period or periods for which they are applying for amnesty.

• Amnesty programs were available in the following states

Ohio Tax Amnesty Program - Runs from May 1, 2012 through June 15, 2012. During this time, Ohio will waive all penalties and half the interest for eligible taxpayers that file delinquent tax returns and pay the taxes due. The program applies to all tax periods for which the original tax return was due before May 1, 2011. To be eligible for Ohio's general tax amnesty, taxpayers must have owed taxes on May 1, 2011.

Texas' "Fresh Start" Amnesty Program - Runs from June 12, 2012 through August 17, 2012. During this time, Texas will waive all penalties and interest for eligible taxpayers that file delinquent tax reports and pay the taxes due. The program applies to all tax periods for which the original tax return was due before April 1, 2012.

If you have businesses in the states mentioned above, we strongly suggest franchisors contact their tax advisors to determine the appropriate actions to be taken.

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